DOJ Drops Investigation Into PSERS — But Challenges Remain for the Fund

The Pennsylvania pension is still facing an SEC probe.

Hannah Beier/Bloomberg

Hannah Beier/Bloomberg

Over a year after Pennsylvania’s Public School Employees’ Retirement System hired a law firm amid a federal probe, some of its legal troubles have come to a close.

The $75.9 billion pension fund announced Tuesday that the U.S. Department of Justice has “closed its investigation” into the fund.

“We understand from the closure of the investigation that DOJ will not be pursuing civil or criminal charges,” Chris Santa Maria, board chair, said in a statement. “We have no further comment at this time, as the SEC investigation remains ongoing.”

The DOJ did not respond to a request for comment on Tuesday.

PSERS has been embroiled in controversy since March 2021 due to internal and federal investigations. The fund hired law firms to look into a misstatement of its nine-year investment performance, federal tax qualification issues on the fund’s risk calculations, and the DOJ and Securities and Exchange Commission probes.

After getting the law firms involved, PSERS hired Verus Investments as a consultant in an “emergency” move. PSERS’s board attempted to retain Verus for outsourced chief investment officer services as well, but the resolution was ultimately rejected.

Still, soon after that vote, chief investment officer Jim Grossman and executive director Glen Grell announced their retirements.

A governance review followed, the results of which were published in January. The review, conducted by Funston Advisory Services, found that competing opinions of board members on asset allocation and investment decisions impacted their ability to effectively run the fund.

One of those board members, Katie Muth, filed a lawsuit against PSERS, seeking access to certain documents related to the investigation into a PSERS real estate investment in Harrisburg, Pennsylvania. The lawsuit is ongoing. PSERS filed its response in April.

The organization has named a new executive director, although its search for a CIO is ongoing. Interim Executive Director Terrill J. Sanchez permanently took on the role in June.